Mmmm, donuts

May 10, 2008

How To Avoid Paralysis by Analysis (or “Damn The Donuts – Full Speed Ahead”)

by Freddy J. Nager, Founder of Atomic Tango + Donut Addict…

“There are many methods for predicting the future. For example, you can read horoscopes, tea leaves, tarot cards, or crystal balls. Collectively, these methods are known as ‘nutty methods.’ Or you can put well-researched facts into sophisticated computer models, more commonly referred to as ‘a complete waste of time.’” — Scott Adams, The Dilbert Future

Once upon a time I found myself in a meeting at one of the world’s largest PR agencies. In the midst of a high-tech conference room featuring a tower of gourmet donuts, the PR agency told our mutual client, a Web startup, that they needed to conduct more research.

The client was visibly shocked. They were on the verge of going beta, and had already worked with this PR agency for nearly a year, paying them $10K a month for the privilege. The additional research would cost thousands of dollars more and set the launch back months. Why was this recommendation coming now?

My thought: Just like a giant agency to avoid doing any actual work for a small client.

I also weighed the value of research: it certainly helps — I teach it and require it in my classes — but too much research can leave a company stricken with that deadly disease “paralysis by analysis.” That’s when action gets delayed again and again and again because somebody wants to conduct even more studies. By the time the company completes studying, our modern marketspace has changed so much, the original findings no longer apply. So the company has to now conduct yet more studies on these new developments…

Opportunity Cost + Opportunities Lost

Companies will extol the value of research without considering the opportunity costs: what business did they miss out on while conducting trivial pursuit?

I knew a would-be entrepreneur who talked about starting a business for three years. He jumped through all the official hoops from incorporating to designing a logo because, hey, that’s fun and it feels like work. He also visited prospective manufacturers for his low-tech consumer product. But rather than manufacture a single item, he sent out one marketing survey after another to friends and family. Then, in the midst of his research of people who said only nice encouraging words to him, a competitor appeared. That made him panic. So he finally launched his product in 2008, filling his apartment with boxes of merchandise, when along came something called a “recession”…

Opportunity lost.

Private sector advocates often criticize the public sector for “paralysis by analysis,” but this viral contagion is spreading to the private sector as well from business schools, where most professors exist primarily to conduct research. As a recovering MBA myself, I stress the importance of critically evaluating options, and not just blindly accepting traditional processes or so-called “best practices.” (How I loathe that term.) That’s especially true of research.

Criteria: The Right Amount at the Right Time

Research is absolutely essential before launching any business or major marketing campaign — but only the right amount at the right time. No amount of planning can prepare you for everything. You can’t know exactly what your competitors are planning (unless you’re the New England Patriots). You can’t predict disasters or the stock market. But research and planning are far superior to just working from gut feelings.

You should also conduct as much research as possible in such categories as product safety and potential business partners and spouses. But when it comes to marketing, you should moderate your research urges based on 3 criteria:

  1. The urgency of your situation. Is there a deadline? Is your competition preparing to launch a similar product? Are your investors breathing down your neck and telling you to get on with it already? In times of urgency, an executive needs to earn their paycheck by making a risky decision. You’re not getting paid the big bucks to sit there and say, “But Captain, I need more time…”
  2. Your financial resources. Can you afford to hire a professional researcher? I knew a barely competent focus group “expert” who charged $10,000 to conduct a simple session with 10 people, the results of which were completely ignored by the client. (I don’t blame the client. Focus groups have notoriously rejected everything from telephone answering machines to minivans to the TV series “Seinfeld.”) Are you better off searching the Web for the information you need? There’s a reason research consultancies exist: they’ve already done the work, and just need you to buy their book or white paper — an expense, but far less than conducting the research yourself.
  3. The size of your investment. How much is at risk? If you’re launching a multi-million-dollar project, by all means, conduct extensive research. If you’re running an ad in a magazine, just run the ad. I once worked with a dotcom VP of Marketing (a former computer engineer with a Stanford MBA) who asked me to create a spreadsheet projecting the full range of possible returns on a $3000 print ad. I questioned the value of the research, since not all benefits of advertising can be projected or even measured, but I did as requested. At my rates, the spreadsheet cost $1000. She read only the worst-case scenarios, then declined to run the ad. So essentially, her risk aversion guaranteed a 0% chance of success. As much as I enjoyed the money, for only $2000 more, she could have discovered what would really happen.

The Alternative: Pull a Nike

If none of these criteria justifies conducting research, just do it and learn by doing. Not exactly a revolutionary concept — it’s an option most entrepreneurs prefer. I’m not suggesting that you go big and wide from the start. Rather, test your idea on a small basis — small being larger than a focus group, but smaller than a worldwide campaign.

For example, you can launch your product in a representative mid-sized city like Portland, Peoria, or Pittsburgh before conducting a national rollout. Hollywood often does this with its more experimental films, such as “Paranormal Activity,” gradually expanding the release based on reviews and audience reaction.

Learning by doing is what that client of the giant PR agency decided to do. Rather than conduct additional extensive and expensive research, at my suggestion they fired the PR agency and went ahead with their beta launch: after all, learning is the entire point of going beta. Did they make mistakes that could have been prevented by research? Possibly. At the same time, only real interaction with the market could reveal hidden problems in their business model. And by actually entering the market and handling the day-to-day challenges, they ultimately realized that this particular business wasn’t a good match for their interests, so they wound up selling their startup for a profit to some investors.

No amount of research could have told them whether a business suited them personally. They learned the hard way — but it sure beat sitting around a meeting room staring at polling data, even with a tower of gourmet donuts.

(photo by Tony Webster from San Francisco, via Wikimedia Commons)

PS: Here’s a brilliant comic on research overzealousness.

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Freddy is the Founder & Creative Strategist of Atomic Tango. He also teaches at the University of Southern California (go Trojans!), shoots pool somewhat adequately, and herds cats. Freddy received his BA from Harvard and his MBA from USC.

6 Responses

  1. I had a lot more to say than what I’m going to say here because I was sidetracked by this flashback: “VP of Marketing” (little more than a former computer engineer with a Stanford MBA). I have no words for that. :-) :-)

    Your approach to the research and campaigns can be extended to launching websites as well.

    I know a site (not the aforementioned one) that had several versions of the site created before launching because it took so long to build the “perfect” site with so much in it, that by the time it was ready, it was no longer relevant to their needs.

    Sometimes you just need to know how to choose the important elements, launch as a beta, and continue adding from there, or it will never happen.


    Freddy: Amen, sister. I would also add that companies should hire the best, most experienced professionals to work on the project from the get-go. Too often I’m called in to fix a website that was thrown up (pun intended) in a hurry by the cheapest web-development firm the company could find. Research and testing? Be strategic and moderate. Professional talent? Go all the way.

  2. Yeah…this is the fatal flaw of many small businesses. The test market is essential but sometimes (like Robert Downey Jr says in Iron Man) “You have to run before you can walk.”

    :D

    In other words some things have to be jump started before you can run around and test things out…how do you know that this one feature will be needed until you have 10,000 users on your website?

  3. Word Freddy! Preach on.

    I have the opposite problem – jump in with no research-itis. But I definitely am culpable of wanting to cheap out “for now” regarding a website. Cough up the bucks now when I’m a no-name nobody? ::shiver:: Convince this Chinese to give up the dough!

    May is Money Month, btw, here at 52 Faces.

  4. Some people want to research everything to death because they don’t have the balls to pull the trigger. Others look to outside consultants to provide the big ideas to make their business successful. Neither approach works. It all boils down to this … Some people are destined to hire people, and some people are destined to be hired.

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